No matter what you call it – pay yourself first, save, setting money aside for a rainy day – making sure you take the first chunk out of your paycheck is an important element of living a prosperous, rewarding life. We’ve all experienced Parkinson’s Law; the idea that we tend to expand our spending to match our income. Thus, setting aside money in savings is an important thing to do first before you do anything else.
Some may ask, “Dustin, do I still pay myself 10% if I have debt? What about my mortgage?” The answer is simple: yes! This idea of paying yourself first is a principle. That means that it’s true no matter where or when you apply it. Even for those in debt or who may make very little money, there is wisdom in making sure you’re saving money. I like to use 10% as a general rule of thumb. This 10% is what I use for investments and emergencies.
Some people have a separate account for their savings. This is a good way to do it, so you are better able to control your spending. For those of you out there who are more like me, and the temptation to spend that 10% is just too much, I have a quick tip. I don’t just have a separate account where I put my savings. I have a separate bank that keeps my savings; this bank is easy to put money into and harder to get money out of. Doing this helps to remove some of the temptation for me to go out and just spend the money I’ve put into savings.
I’ve been there. I know how hard it can be to look at your expenses and then look at your income and wonder how you can possibly fit 10% of your paycheck into savings. But I promise you, if you do that first, what is left of your income will be enough to cover your needs. Paying yourself first isn’t always easy, but it will be well worth the effort!
For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: